Question

How to solve using BA II Calculator?

Draw a time line showing the cash flows for a bond that has a four year maturity, semiannual coupon payments, a coupon rate of 5 percent, and a par value of $1,000.

Using the information above, value the bond under the following interest rates:

Market Rate = 3%

Market Rate = 5%

Market Rate = 7%

Answer 1

Given Market rates 3%, 5% & 7% per anum

The marjet rates are 1.5%, 2.5% & 3.5% per six months.

Value of Bond = PV of Cash flows arising from it in future.